Ghana's Energy Sector: Growing Demand Excites Investors

Fifty-nine years is long enough for a country like Ghana to have overcome its energy sector challenges and to be in a position to export power to other countries in the sub-region. With neighboring countries battling with power deficits, any power exports from Ghana would be received with wide arms --- and in good terms.

Unfortunately, however, this has not happened and Ghana is still struggling to overcome challenges in its energy sector, much to the chagrin of its citizenry. Currently, the country has a combined installed capacity of 2,846.5 megawatts from hydro, thermal and renewable sources, and that is still not enough to meet demand, which is estimated to be growing at 20 per cent every year. Omane Frimpong, CEO of Wilkins Engineering, Ghana’s world-class engineering company, sees clearly where the solution lies: “To increase our generation capacity... we would opt for IPP, independent power producers. So the solution lies within the private sector.”

The country’s electricity demand is expected to move from 2,000 megawatts to 6,000 megawatts in the medium term before peaking at 8,000 megawatts in the long run. This means that there is still room for investors in a sector that promises high returns. Over the years, the country's strong economic growth has combined with its rapid urbanization to quicken the pace of power demand and that has comfortably outstripped the supply.

Although it can be classified as a fast growing one, Ghana’s energy sector has been bedeviled with a lot of challenges, mainly as a result of technical and financial reasons, the very challenges yield hunting investors can address. These notwithstanding, mention must be made that investors would have to play their cards if they ever plan investing their pennies in the sector.

Ghana's electricity demand is expected to move from 2,000 megawatts to 6,000 megawatts in the medium term before peaking at 8,000 megawatts in the long run. This strong growth in demand amidst a supply deficit present enormous opportunities for investors.

Changing energy mix, an investment clue to watch

Prior to 2010, Ghana’s energy mix was largely hydro, with minimal additions from thermal and renewable energy sources. That trend is, however, changing, as the country capitalizes on emerging challenges and opportunities to diversify its energy mix and get value for money.

With water levels at the nation's biggest hydro station, the Akosombo Dam, dropping to 73.624 meters as of January 26, 2016, hydro sources are no longer economical for a country struggling to bridge a widening fiscal deficit. The Akosombo Dam, the biggest energy source, has an installed capacity of 1,020 Megawatts, although continues decline in water levels means that the dam will not be able to produce at peak amounts. This has prompted efforts from the relevant authorities aimed at diversifying the mix to be able to cut down costs and insulate the country from eminent challenges.

Players in the energy sector are, therefore, banking their hopes on other sources, as they work to find lasting solutions to the country’s energy deficit. While the Volta River Authority (VRA), the national power generator, is banking its hopes on thermal generation sources, the industry regulator, the Energy Commission is looking to renewable sources as the best bet to solving the challenge. So far, VRA has taken a front role in pursuing the use of Liquefied Natural Gas (LNG) to generate electricity as a measure to secure future gas supply reliable enough to complement gas produced from the Ghana Gas Processing Plant at Aboadze.

The Energy Commission on the other hand is developing national policy and strategy that will serve as a roadmap to the proper harnessing of renewable resources such as biomass, solar, geothermal, water and wind. All these developments present enormous opportunities for the investor. With the gas plant for instance, investors could set up plants to manufacture cylinders and accessories, which word be needed to boost the gradual shift from firewood use to gas in homes. Another energy source that is getting wider attention and therefore an investment option for investors is the power barges. To help plug the deficit in the sector, the government recently sealed some deals with two international power generators to generate power from sailing ships to be fed into the national grid. The two deals, the Karpower Ship and AMERI, are expected to add a total of 500 megawatts. So far, Karpower has started feeding into the national, resulting in the stability achieved in national electricity supply.

Petroleum finds boost energy prospects

A 2013 World Bank report on “Energising economic growth in Ghana: Making the power and petroleum sectors rise to the challenge” revealed the extent to which investment is in high demand in the energy sector. The diagnosis of Ghana’s energy sector showed that it poses a great threat to economic growth. “At a time when the Ghanaian economy is achieving sustained growth in excess of six percent annually, with ambitions to raise this further, there is a risk that misguided and inappropriate policies would lead to the power sector becoming a drag on the economy,” the report said.

Added that although the problems and solutions of the sector were well known, what had been lacking was a decisive and timely decision making to break the tendency to adopt reactive measures that often came too late when proactive measures would have led to better outcomes. The challenges, the bank said, were lack of adequate and secure quantities of reasonably priced fuel for power generation, and the lack of adequate public funds to finance the sector’s investment requirements. The huge indebtedness of the utility companies clearly confirms this. These notwithstanding, bright prospects still remain. The coming in of the Tweneboa-Enyera-Ntomme (TEN) Project means that the government could have access to cheap fuel to power the thermal plants dotted across the country. The America energy giant, General Electric, also has a project in the country to produce 1,000 megawatts of power by 2017. These present investment windows for investors with interest in energy.

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